Value Relevance of Firm Size Proxies in Predicting Stock Returns: Market Capitalization or Total Book Assets?

2012 ◽  
Author(s):  
Gulraze Wakil
Keyword(s):  
Stock Returns ◽  
Firm Size ◽  
Value Relevance ◽  
Market Capitalization

Freedom Indices and Capital Asset Pricing Model: Some Malaysian Evidence

2020 ◽  
Vol 1 (1) ◽  
pp. 1-21
Author(s):  
Ying Tay Lee ◽  
Devinaga Rasiah ◽  
Ming Ming Lai
Keyword(s):  
Human Rights ◽  
Asset Pricing ◽  
Stock Returns ◽  
Firm Size ◽  
Explanatory Power ◽  
Least Square ◽  
Press Freedom ◽  
Capital Asset Pricing ◽  
Capital Asset ◽  
Cross Sectional

Human rights and fundamental freedoms such as economic, political, and press freedoms vary widely from country to country. It creates opportunity and risk in investment decisions. Thus, this study is carried out to examine if the explanatory power of the model for capital asset pricing could be improved when these human rights movement indices are included in the model. The sample for this study comprises of 495 stocks listed in Bursa Malaysia, covering the sampling period from 2003 to 2013. The model applied in this study employed the pooled ordinary least square regression estimation. In addition, the robustness of the model is tested by using firm size as a controlled variable. The findings show that market beta as well as the economic and press freedom indices could explain the cross-sectional stock returns of the Malaysian stock market. By controlling the firm size, it adds marginally to the explanation of the extended CAP model which incorporated economic, political, and press freedom indices.

Value Relevance of Disaggregated Information: An Examination of the Rate and Volume Analysis of Bank Net Interest Income

2019 ◽  
Vol 34 (1) ◽  
pp. 19-43
Author(s):  
Qing L. Burke ◽  
Terry D. Warfield ◽  
Matthew M. Wieland
Keyword(s):  
Stock Returns ◽  
Value Relevance ◽  
Comprehensive Analysis ◽  
Funding Sources ◽  
Rate Analysis ◽  
Interest Income ◽  
Performance Drivers ◽  
Income Measure ◽  
Important Form ◽  
Is Value

SYNOPSIS A potentially important form of financial information disaggregation is to segregate the change in an income measure into its underlying performance drivers. In this study, we perform a comprehensive analysis of the usefulness of such disaggregation to investors. We utilize the volume and rate analysis in banks' 10-K filings, in which banks disaggregate annual changes in net interest income into changes in the balances (“volume variance”) and changes in the rates (“rate variance”) of assets and liabilities. We document that volume and rate variances are associated with bank characteristics, including market power, funding sources, and credit risk. We find volume and rate variances are predictive of future net interest income and are positively associated with stock returns and prices, suggesting the disaggregated information is value relevant. Our study informs regulators and users by showing that disaggregated information along volume and rate dimensions has predictive and confirmatory value.

Firm Size and Cyclical Variations in Stock Returns

2000 ◽  
Vol 55 (3) ◽  
pp. 1229-1262 ◽  
Author(s):  
Gabriel Perez-Quiros ◽  
Allan Timmermann
Keyword(s):  
Stock Returns ◽  
Firm Size

The value relevance of capital expenditures and the business cycle

2018 ◽  
Vol 35 (3) ◽  
pp. 386-406 ◽  
Author(s):  
Sungsoo Kim ◽  
Brandon byunghwan Lee
Keyword(s):  
Business Cycles ◽  
Stock Returns ◽  
Value Relevance ◽  
Financial Data ◽  
Capital Expenditures ◽  
Capital Investments ◽  
Content Type ◽  
Market Participants ◽  
Business Conditions

Purpose This paper aims to clarify the relationship between corporate capital investments and business cycles. Specifically, a major purpose of this paper is to investigate whether there are inherent differences in corporate investment patterns and whether the stock market exhibits different reactions to the value relevance of capital expenditures across different business conditions. Design/methodology/approach The authors use pooled ordinary least square regressions with archival stock price data and financial data from CRSP and Compustat. The authors regress buy and hold returns on the main test variables and control variables that are identified to be related to the investment literature. Findings This paper provides empirical evidence that US firms’ capital expenditures are more value relevant to capital market participants during expansionary business cycles and, conversely, less value relevant during contractionary business cycles. This evidence validates previous literature that has found the information content of capital expenditures to be uncertain and cyclical in nature. Research limitations/implications The main limitation of this paper, as with other work dealing with stock returns and archived financial data, is that the authors try to match stock returns with contemporaneous financial data in an association study context. The precise mapping in this methodology is always challenging and has been questioned in the literature. Practical implications This paper has various implications for capital market participants. Capital expenditures are good news for investors, but they will make a better investment when firms make capital investments during an expansionary period. Creditors deciding whether to extend credit to firms would benefit from more accurate information on the viability of long-term investment. The results also suggest to creditors that an excessive number of loans during the contractionary period may be suboptimal because firms’ returns on capital investment are smaller in that period than in the expansionary period. Social implications Given the valuation of implications of long-term capital investments across different business conditions, this paper sheds light on asset allocations for mutual funds, institutional investors who are entrusted with investors’ investments including retirement funds. Originality/value This paper fulfils an identified need to study how capital investments are valued differently across different business conditions.

The Effect of Profitability, Asset Structure, Company Size on Stock Returns with Corporate Governance as Moderating Variables in Manufacturing Companies on the IDX in 2009-2018

2021 ◽  
Vol 8 (8) ◽  
pp. 55-63
Author(s):  
Deby Yurika Lasmarito Siahaan ◽  
Rina Br Bukit ◽  
Tarmizi .
Keyword(s):  
Corporate Governance ◽  
Stock Returns ◽  
Firm Size ◽  
Significant Influence ◽  
Stock Return ◽  
Company Size ◽  
Research Model ◽  
Manufacturing Companies ◽  
Research Results ◽  
Moderating Variables

The research objective was to examine and analyze whether Profitability, Asset Structure, Firm Size simultaneously and partially influenced Stock Returns in Manufacturing Companies. In addition, this study also tries to prove whether Corporate Governance can be used as a moderator in the research model. The research results showed that simultaneously Profitability, Asset Structure, Firm Size significantly influenced Stock Returns. Partially, profitability has a positive and significant influence on Stock Returns. Asset Structure has a positive and significant influence on Stock Returns, and Company size has a positive and insignificant influence on Stock Returns. The variable of Corporate Governance can moderate the influence of Asset Structure on Stock Returns. However, Corporate Governance will not be able to moderate the influence of Profitability on Stock Returns. Keywords: Profitability, Asset Structure, Firm Size, Stock Return, and Corporate Governance.

scholarly journals Does Financial Performance Matter? Evidence on the Impact of Liquidity and Firm Size on Stock Return in Indonesia

2020 ◽  
Vol 11 (4) ◽  
pp. 546
Author(s):  
Mochammad Chabachib ◽  
Ike Setyaningrum ◽  
Hersugondo Hersugondo ◽  
Intan Shaferi ◽  
Imang Dapit Pamungkas
Keyword(s):  
Stock Returns ◽  
Firm Size ◽  
Significant Relationship ◽  
Stock Return ◽  
Stock Exchange ◽  
Mediating Effect ◽  
Return On Equity ◽  
Stock Investment ◽  
Equity Ratio ◽  
The Impact

In the modern era, stock investment can attract domestic investors or foreign investors. The objective is to invest their funds at the capital market that expect higher stock returns. The study aims to analyze factors that can affect stock returns and know the mediating effect of return on equity. The object of this research is the property and real estate sector that is listed on the Indonesia Stock Exchange from 2013 to 2018. This research used debt to equity ratio, current ratio, total asset turnover, firm size as independent variables and stock returns as dependent variables. Path analysis is used as reseach method tools with SMART PLS.The result says that debt to equity ratio and return on equity has a positive significant relationship with stock return, meanwhile firm size has a significant negative significant relationship with stock returns. Furthermore, return on equity can mediate the relationship between debt and equity ratios to stock returns.

scholarly journals Do consistent CSR activities matter for firm value?

2016 ◽  
Vol 14 (1) ◽  
pp. 340-350 ◽  
Author(s):  
Loai Alsaid
Keyword(s):  
Stock Returns ◽  
Firm Value ◽  
Value Relevance ◽  
Explanatory Variables ◽  
Earnings Response Coefficient ◽  
Unexpected Earnings ◽  
Valuation Effect ◽  
Interaction Variables ◽  
Earnings Response ◽  
Corporate Social

This paper investigates how investments in corporate social responsibility (CSR) activities affect firm value. We categorise firms’ CSR activities as strategic or opportunistic based on consistency, and analyse the differential value relevance effect. We use the Egyptian Economic Justice Index (EEJI) as the most representative measure for firms’ CSR activities in Egypt. To measure valuation effect, we adopt an earnings response coefficient (ERC) model. Our main explanatory variables are interaction variables with unexpected earnings and two dummy variables; one indicating CSR activities, and one indicating their consistency. We document these variables as positively and negatively significant. Our findings show that investing in CSR activities consistently and strategically may increase firm’s profitability and firm value. However, firms that sporadically invest in CSR activities show a smaller relationship between unexpected earnings and stock returns than firms that consistently invest in CSR activities.

scholarly journals The impact of liquidity and size premium on equity price formation in Serbia

2012 ◽  
Vol 57 (195) ◽  
pp. 43-78 ◽  
Author(s):  
Jelena Minovic ◽  
Bosko Zivkovic
Keyword(s):  
Asset Pricing ◽  
Stock Returns ◽  
Firm Size ◽  
Market Value ◽  
Asset Returns ◽  
Factor Models ◽  
Price Formation ◽  
Good Tool ◽  
Equity Price ◽  
The Impact

The goal of this paper is to examine the impact of an overall market factor, the factor related to the firm size, the factor related to the ratio of book to market value of companies, and the factor of liquidity risk on expected asset returns in the Serbian market. For this market we estimated different factor models: Capital Asset Pricing Model (CAPM by Sharpe, 1964), Fama-French (FF) model (1992, 1993), Liquidity-augmented CAPM (LCAPM) by Liu (2006), and combination LCAPM with FF factors. We used daily data for the period from 2005 to 2009. Using a demanding methodology and complex dataset, we found that liquidity and firm size had a significant impact on equity price formation in Serbia. On the other hand, our results suggest that the factor related to the ratio of book to market value of companies does not have an important role in asset pricing in Serbia. We found that Liu?s two factor LCAPM model performs better in explaining stock returns than the standard CAPM and the Fama-French three factor model. Additionally, Liu?s LCAPM may indeed be a good tool for realistic assessment of the expected asset returns. The combination of the Fama-French model and the LCAPM could improve the understanding of equilibrium in the Serbian equity market. Even though previous papers have mostly dealt with examining different factor models of developed or emerging markets worldwide, none of them has tested factor models on the countries of former Yugoslavia. This paper is the first to test the FF model and LCAPM with FF factors in the case of Serbia and the area of ex-Yugoslavia.

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